Bert Scholtens

A critique on the theory of financial intermediation

Abstract This comment discusses the review by Franklin Allen and Anthony Santomero of the theory of financial intermediation in the 20th anniversary special issue of the Journal of Banking and Finance. We do not fully agree with their view that risk management is only of recent importance to the financial industry and with putting central the concept of participation costs. We suggest how the theory of financial intermediation might be developed further in order to understand present-day phenomena in the financial services sector.

Does Ownership Type Matter for Corporate Social Responsibility

Manuscript Type: Empirical. Research Question/Issue: This study examines how different types of owners relate to corporate social responsibility (CSR). Research Findings/Insights: We use firm‐level data for more than 600 European firms from 16 countries and 35 industries for 2005. We find that ownership by employees, individuals, and firms is associated with relatively poor corporate social policies of the firms they invest in. In contrast, the holdings by banks and institutional investors as well as those by the state appear to be neutral in this respect. Theoretical/Academic Implications: This study develops and tests notions as to how particular types of owners could have a specific impact on the firms CSR. The relative value put upon CSR can differ along different types of owners. This results from their different economic roles in society. The study provides empirical support for the relationship between ownership type and CSR policies in Europe. As such, it provides a new focus on the content of shareholder activism, namely that shareholder background has to be taken into account. Another innovation is that we show it is important to account for the multidimensional nature of CSR as well. Practitioner/Policy Implications: This study offers a new perspective for firms, investors and other stakeholders about portfolio investments and CSR. As we find that it does matter who invests, corporate engagement policies can be directed much more effectively. In particular, the investors who act as intermediaries appear to be the most sensitive ones in this respect. Our study suggests that firms should take the background of their shareholders into account in relation to their CSR strategy. Furthermore, our study helps stakeholders to direct their efforts more effectively. It also provides a perspective for executives and investment managers of multinational firms to consider if and how they can create social value next to shareholder value. We suggest that policy makers promote the transparency of ownership information as well as that of CSR performance.

How Important are Foreign Banks in the Financial Development of European Transition Countries

This article analyses the development of the banking sector in European transition countries. We find that, although bank assets increased during the 1990s, credit to the private sector remained relatively low. Foreign-owned banks have become major players in the financial system of these countries. However, foreign bank presence and financial development in general vary considerably among the transition economies. Foreign-owned banks have, in general, higher profitability levels than domestic banks. Furthermore, it appears that foreign and domestic bank performance tend to converge.

Analytical issues in external financing alternatives for SBEs

As the amount of information about an enterprise is generally not neutral with respect to firm size, financiers have problems to identify the default risk associated with a borrower or to have control over a borrowers investments. This review paper analyses how various control mechanisms are fit to reduce this information problem and how various types of capital suppliers are endowed to finance small business enterprises.

Style and Performance of Dutch Socially Responsible Investment Funds

Controlling for investment style, the performance differential between Dutch socially responsible mutual funds and conventional investments over 2001-2003 is not statistically significant. This confirms conclusions drawn elsewhere in the literature. Contrary to most of the findings on socially responsible investing, the socially responsible funds seem to be tilted toward value stocks in this period, which would lend support to the rational asset pricing theory.

Financial regulation and financial system architecture in Central Europe

Abstract At the beginning of the transition, advice to Central European countries with respect to how to set up their financial systems was based on models used in western economies. This paper analyzes the experiences to set up a financial system in Central Europe. The experience in the first transition years (1990–1996) with financial system architecture shows that changes are slow but that the Central European countries tend to catch up more quickly with the western ones in the case of their banking systems than with respect to their stock markets.

Scoring on the stock exchange? The effect of football matches on stock market returns: an event study

We analyse the effect of results of football matches on the stock market performance of football teams. We analyse 1274 matches of eight teams in the national and European competition during 2000–2004. We find that the stock market response is significant and positive for victories and negative for defeats. The response is significantly stronger in the case of defeat. The response is stronger for matches in the European competition than for those in the national competition. Unexpected results have a stronger impact for European matches than expected ones but this is not the case in the national competition.

Socially Responsible Investing and Management Style of Mutual Funds in the Euronext Stock Markets

This paper analyses fund management styles on the Euronext stock exchanges. Especially, we investigate how social responsibility is accounted for. We use style analysis to assess fund performance in Belgium, France, and the Netherlands for over 800 investment funds during the 1990s. We find remarkable and significant differences in performance characteristics among these markets. Furthermore, we find that funds that to some extent mirror well known social responsibility indices tend to perform better than funds that bear no relationship with social responsible investment strategies.

On the comovement of bond yield spreads and country risk ratings

This article investigates whether bond yield spreads are suitable for analyzing country risk. As bond prices and bond yields are determined in the secondary market, bond yields and their spreads vis-à-vis U.S. Treasuries may provide a more continuous and reliable information base than traditional measure of country risk. In more than a dozen countries, we study the association between the yield spread and the Institutional Investor country rating in the mid-1990s. Rank correlations show that bond yields are a good reflection of country risk.

The relationship between size, growth and profitability of commercial banks

Using a dynamic panel model for more than 15 000 banks from 148 countries from 1988 to 2010, we investigate the interaction between size, growth and profitability of banks. For our total sample, we cannot reject the hypotheses that the variability of bank profitability and the level and variability of bank growth are independent of bank size. However, in high-income Organization for Economic Cooperation and Development (OECD) countries bigger banks grow slower but are more profitable than small banks. While bank growth is not persistent, bank profitability is persistent. Finally, we find that bank growth and bank profitability are independent of each other.